Ahead of the expected publication of the Conservative manifesto next week, Prime Minister Theresa May announced that the Government would seek introduce a cap on standard variable tariffs to limit the extent to which energy firms can increase their prices for consumers.
The intention behind this policy is to close the gap between standard tariffs and the cheapest deals. Currently, seven in ten households pay the standard variable tariff. Data from the energy regulator Ofgem demonstrates that the average annual cost of energy from the Big Six was at its peak in February last year, with a £350 difference between the standard and cheapest tariff. Making the case for state intervention at the Conservative Party Conference last October, May identified expensive energy tariffs as an issue that needed to be resolved in the interest of working families.
The campaign pledge demonstrates May’s willingness to go beyond Conservative free market principles in favour of a policy she believed could make a difference to people’s lives. However, it has been subject to significant criticism. Many have drawn a comparison with the energy price freeze proposed by Ed Miliband in Labour’s 2015 election manifesto. When Miliband proposed it, he was derided by David Cameron as living in a “Marxist universe”, while George Osborne remarked that the policy would only drive an increase in prices just before the freeze was introduced. In Osborne’s view, a consequence of this policy would be that energy companies would not invest in the necessary energy infrastructure, which would again drive up prices in the long-term. This criticism was echoed by former Energy Secretary Ed Davey this week, who said: “It is never a good idea to copy the economic strategy of Ed Miliband… This will damage investment in energy when it is needed more than ever”.
Acting seemingly in defiance of ideological tradition, Theresa May has embraced a platform once campaigned on by the opposition party while simultaneously seeking to defend her Conservative credentials. The policy is alleged to have displeased several Conservative candidates, but speaking in support of this campaign pledge on Tuesday, the Prime Minister reiterated her party’s commitment to the free market while arguing that, unlike Labour’s price freeze, the Conservative policy would allow energy prices to come down.
Whether the difference between the Labour and Conservative versions of policy is one of semantics or substance is one for the policy experts. Whether it will be more successful for May than it was for Miliband is one the electorate will decide on 8th June.